On January 1, Year 1, Hart Company issued bonds with a face value of $150,000, a stated

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On January 1, Year 1, Hart Company issued bonds with a face value of $150,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $156,150. Hart used the effective interest rate method to amortize the bond premium. 


Required
a. Prepare an amortization table as shown next:

Cash Payment Interest Expense Carrying Value Premium Amortization 156,150 155,081 January 1, Year 1 December 31, Year 1


b. What item(s) in the table would appear on the Year 4 balance sheet?
c. What item(s) in the table would appear on the Year 4 income statement?
d. What item(s) in the table would appear on the Year 4 statement of cash flows?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
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Related Book For  book-img-for-question

Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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